BranchOut Food Inc

Previous wording

We are engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. Our products have historically been manufactured for us by two contract manufacturers, one based in the Republic of Chile, and the other in the Republic of Peru. The manufacturing facility in Peru houses our new large-scale continuous through-put dehydration machine that completed its first production run in the first quarter of 2023, and which substantially increased our production capacity. Our dehydrated fruit and vegetable products are produced using a new proprietary dehydration technology licensed by us from a third party. Our customers are primarily located throughout the United States.

Current wording

We are engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. Our products have historically been manufactured for us by two contract manufacturers, one based in the Republic of Chile, and the other in the Republic of Peru. The manufacturing facility in Peru houses our new large-scale continuous through-put dehydration machine that completed its first production run in the first quarter of 2023, and which substantially increased our production capacity. Our dehydrated fruit and vegetable products are produced using a new proprietary dehydration technology licensed by us from a third party. Our customers are primarily located throughout the United States. In 2024, we decided to initiate our own production facility in Peru to become vertically integrated. Our new factory is currently being built out and expected to be online and operational by October 2024. We have two large-scale REV machines on order from Enwave Corporation, a REV 100 and REV 120 machine. Both are currently in transit to the Peru facility. We also purchased a small REV 10 R&D machine that is also being delivered to Peru for installation into our new facility. In addition, we expect to move the REV 60 machine thatis installed at ourprior leased facility to our new facility in thenear term.

Previous wording

We entered into a private labeling contract with one of the world’s largest retailers in late 2022 to supply the retailer with two products for placement in half of their domestic stores. In April 2023, the same retailer agreed to carry two additional products of ours in certain of their stores. In April 2024, we announced that we had entered into an additional contract with this retailer that is expected to result in our products being placed in a total of 1,400 of its stores in September, 2024, and increase the total annualized revenues that we may generate from this retailer to $8 million.

Current wording

We entered into a private labeling contract with one of the world’s largest retailers in late 2022 to supply the retailer with two products for placement in half of their domestic stores. In April 2023, the same retailer agreed to carry two additional products of ours in certain of their stores. In April 2024, we received a commitment from this retailer to carry another product of ours in their stores. Based on this most recent commitment, we anticipate that our products will be carried in a total of 1,400 of this retailer’s stores in September 2024, which will increase the total annualized revenues that we may generate from this retailer to $8 million.

Previous wording

We are currently developing additional products, including chocolate covered fruit items and private label products for large retailers.

Current wording

We are currently developing additional products, including dragon fruit and private label products for large retailers.

Previous wording

As of March 31, 2024, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $13,861,508, with working capital of only $399,444. We are too early in our development stage to project revenue with a necessary level of certainty; therefore, we may not have sufficient funds to sustain our operations for the next twelve months and we may need to raise additional cash to fund our operations. These factors raise substantial doubt about our ability to continue as a going concern. The Company continues to develop its operations. In the event sales do not materialize at the expected rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives.

Current wording

As of June 30, 2024, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $14,804,062, with working capital of $1,302,986. We are too early in our development stage to project revenue with a necessary level of certainty; therefore, we may not have sufficient funds to sustain our operations for the next twelve months and we may need to raise additional cash to fund our operations. These factors raise substantial doubt about our ability to continue as a going concern. The Company continues to develop its operations. In the event sales do not materialize at the expected rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives.

Previous wording

The condensed financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The condensed financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Our ability to scale production and distribution capabilities and further increase the value of our brands, is largely dependent on our success in raising additional capital.

Current wording

The condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The condensed consolidated financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Our ability to scale production and distribution capabilities and further increase the value of our brands, is largely dependent on our success in raising additional capital.

Previous wording

During the fourth quarter of 2023, NXTDried Superfoods, our contract manufacturer located in Peru, became involved in a legal dispute with its landlord and another third party, which resulted in that manufacturer suspending operations. As a result of such dispute, we currently do not have access to the dehydration machine that was previously operated by this manufacturer. Although we have been able to continue to fulfill orders by shifting fulfillment to other manufacturing sources, our costs of goods are expected to increase as a result. In addition, if we are unable to regain access to our dehydration machine and utilize it for the production of our products, our operating results may be materially and adversely affected. In addition, during 2023, we recognized $761,085 of impairment expense, consisting of $485,265, $243,305 and $32,515 on the collectability of a note receivable, VAT taxes receivable and prepaid inventory, respectively, owed to us by NXTDried Superfoods.

Current wording

During the fourth quarter of 2023, NXTDried Superfoods, our contract manufacturer located in Peru, became involved in a legal dispute with its landlord and another third party, which resulted in that manufacturer suspending operations. As a result of such dispute, we currently do not have access to the dehydration machine that was previously operated by this manufacturer. Although we have been able to continue to fulfill orders by shifting fulfillment to other manufacturing sources, our costs of goods have increased as a result. In addition, during 2023, we recognized $761,085 of impairment expense, consisting of $485,265, $243,305 and $32,515 on the collectability of a note receivable, VAT taxes receivable and prepaid inventory, respectively, owed to us by NXTDried Superfoods.

Previous wording

In connection with our lease of the Peru Facility, we purchased a first position mortgage receivable in the amount of $1,267,000, which is secured by the Peru Facility and was owed by the landlord of the Peru Facility to its former tenant, for a purchase price of $1,267,000, of which $275,000 was paid by us on May 10, 2024. The remaining $992,000 will be due and payable by us on August 10, 2024.

Current wording

In connection with our lease of the Peru Facility, we paid $275,000 on May 10, 2024, toward the purchase of a first position mortgage receivable in the amount of $1,267,000, which is secured by the Peru Facility and was owed by the landlord of the Peru Facility to its former tenant, for a purchase price of $1,267,000. The remaining $992,000 was due and payable by us on August 10, 2024, subject to certain requirements which haven’t yet been met, therefore the Company has deferred payment until a later date, to be determined.

Previous wording

Our net revenue for the three months ended March 31, 2024 was $1,467,016, compared to $97,340 for the three months ended March 31, 2023, an increase of $1,056,446, or 1,407%. The increase in revenue was primarily due to increased sales to our largest customer during the three months ended March 31, 2024.

Current wording

Our net revenue for the three months ended June 30, 2024 was $1,362,986, compared to $343,065 for the three months ended June 30, 2023, an increase of $1,019,921, or 297%. The increase in revenue was primarily due to increased sales to our largest customer during the three months ended June 30, 2024.

Previous wording

Our cost of goods sold for the three months ended March 31, 2024 was $1,183,428, compared to $126,982 for the three months ended March 31, 2023, an increase of $1,056,446, or 832%. Cost of goods sold increased primarily due to increased sales during the three months ended March 31, 2024. As a result of the foregoing, we had gross profit of $283,588, representing gross margins of 19%, for the three months ended March 31, 2024 as compared to a gross loss of $29,642, or negative gross margins of 30%, for the three months ended March 31, 2023. Our gross profit margin increased primarily due to cost savings realized as a result of our transition to bulk shipping arrangements during the current period. Cost of goods sold included depreciation expense for the three months ended March 31, 2024 of $56,336, compared to $55,823 for the three months ended March 31, 2023, an increase of $513, or 1%.

Current wording

Our cost of goods sold for the three months ended June 30, 2024 was $1,214,227, compared to $361,461 for the three months ended June 30, 2023, an increase of $852,766, or 236%. Cost of goods sold increased primarily due to increased sales during the three months ended June 30, 2024. As a result of the foregoing, we had gross profit of $148,759, representing gross margins of 11%, for the three months ended June 30, 2024 as compared to a gross loss of $18,396, or negative gross margins of 5%, for the three months ended June 30, 2023. Our gross profit margin increased primarily due to cost savings realized as a result of our transition to bulk shipping arrangements during the current period. Cost of goods sold included depreciation expense for the three months ended June 30, 2024 of $56,335, compared to $55,758 for the three months ended June 30, 2023, an increase of $577, or 1%.

Previous wording

Our general and administrative expense for the three months ended March 31, 2024 was $319,736, compared to $180,900 for the three months ended March 31, 2023, an increase of $138,836, or 77%. The largest components of our general and administrative expenses are advertising and marketing, travel, commissions, and storage, shipping and handling expense, as shown below.

Current wording

Our general and administrative expense for the three months ended June 30, 2024 was $321,201, compared to $141,031 for the three months ended June 30, 2023, an increase of $180,170, or 128%. The largest components of our general and administrative expenses are advertising and marketing, travel, commissions, and storage, shipping and handling expense, as shown below.

Previous wording

Professional fees for the three months ended March 31, 2024 was $390,666, compared to $144,141 for the three months ended March 31, 2023, an increase of $246,525, or 171%. This increase was primarily attributable to increased legal and consulting fees in the current period, as a portion of these fees were capitalized as offering costs on our IPO in the comparative period. Professional fees included $149,594 and $50,446 of non-cash, stock-based compensation for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Professional fees for the three months ended June 30, 2024 was $304,376, compared to $158,205 for the three months ended June 30, 2023, an increase of $146,171, or 92%. This increase was primarily attributable to increased legal and consulting fees in the current period, as a portion of these fees were capitalized as offering costs on our IPO in the comparative period. Professional fees included $140,491 and $18,046 of non-cash, stock-based compensation for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

In the three months ended March 31, 2024, other expense was $25,867 on a net basis, consisting of $28,744 of interest expense, as partially offset by $2,877 of interest income. For the three months ended March 31, 2023, other expense was $170,600 on a net basis, consisting of $173,445 of interest expense, as partially offset by $2,845 of interest income. Other expense decreased by $144,733, or 85%, primarily due to the decreased interest on debt which was mostly settled in June of 2023.

Current wording

In the three months ended June 30, 2024, other expense was $116,139 on a net basis, consisting of $118,957 of interest expense, as partially offset by $2,818 of interest income. For the three months ended June 30, 2023, other expense was $219,640 on a net basis, consisting of $222,551 of interest expense, as partially offset by $2,911 of interest income. Other expense decreased by $103,501, or 47%, primarily due to the decreased interest on debt which was mostly settled in June of 2023.

Previous wording

Salaries and wages for the three months ended March 31, 2024 was $598,286, compared to $251,810 for the three months ended March 31, 2023, an increase of $346,476, or 138%. This increase was primarily attributable to $376,384 of non-cash, stock-based compensation related to stock options awarded during the current period.

Current wording

Salaries and wages for the six months ended June 30, 2024 was $947,883, compared to $688,048 for the six months ended June 30, 2023, an increase of $259,835, or 38%. This increase was primarily attributable to $394,135 of non-cash, stock-based compensation related to stock options awarded during the current period.

Previous wording

Net loss for the three months ended March 31, 2024 was $1,050,967, compared to $777,093 for the three months ended March 31, 2023, an increase of $273,874, or 35%. The increased net loss was primarily due to increased non-cash, stock-based compensation costs, and compliance costs related to reporting as a public company, as partially offset by decreased interest on debt which was mostly settled in the prior year.

Current wording

Net loss for the six months ended June 30, 2024 was $1,993,521, compared to $1,750,603 for the six months ended June 30, 2023, an increase of $242,918, or 14%. The increased net loss was primarily due to increased non-cash, stock-based compensation costs, and compliance costs related to reporting as a public company, as partially offset by increased gross profits and decreased interest on debt which was mostly settled in the prior year.

Previous wording

As of March 31, 2024, we had working capital of $399,444. We have incurred net losses since our inception and we anticipate net losses and negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets. To date, our primary sources of capital have been cash generated from the sales of our products, common stock sales, and debt financing. As of March 31, 2024, we had cash of $251,700, total liabilities of $997,069, and an accumulated deficit of $13,861,508. As of December 31, 2023, we had cash of $657,789, total liabilities of $914,622, and an accumulated deficit of $12,810,541.

Current wording

As of June 30, 2024, we had working capital of $1,302,986. We have incurred net losses since our inception and we anticipate net losses and negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets. To date, our primary sources of capital have been cash generated from the sales of our products, common stock sales, and debt financing. As of June 30, 2024, we had cash of $936,061, total liabilities of $4,672,312, and an accumulated deficit of $14,804,062. As of December 31, 2023, we had cash of $657,789, total liabilities of $914,622, and an accumulated deficit of $12,810,541.

Previous wording

Comparison of the Three Months Ended March 31, 2024 and the Three Months Ended March 31, 2023

Current wording

Comparison of the Six Months Ended June 30, 2024 and the Six Months Ended June 30, 2023

Previous wording

Net cash used in operating activities was $503,578 for the three months ended March 31, 2024, compared to $656,593 for the three months ended March 31, 2023, a decrease of $153,015, or 23%. The decrease was primarily due to our increased gross profit.

Current wording

Net cash used in operating activities was $1,357,463 for the six months ended June 30, 2024, compared to $2,799,724 for the six months ended June 30, 2023, a decrease of $1,442,261, or 52%. The decrease was primarily due to our increased stock-based compensation, accounts receivable, and accounts payable, as partially offset by the $275,000 payment for other assets.

Previous wording

Net cash used in investing activities was $40,100 for the three months ended March 31, 2024, compared to $-0- for the three months ended March 31, 2023, an increase of $40,100. This increase was primarily attributable to $50,000 of property and equipment purchases, as partially offset by $9,900 of advances received on notes receivable in the current period.

Current wording

Net cash used in investing activities was $566,431 for the six months ended June 30, 2024, compared to $10,100 for the six months ended June 30, 2023, an increase of $556,331, or 5,508%. This increase was primarily attributable to $576,331 of property and equipment purchases, as partially offset by $9,900 of advances received on notes receivable in the current period, compared to $10,100 of property and equipment purchases in the comparative period.

Previous wording

Net cash provided by financing activities was $137,589 for the three months ended March 31, 2024, compared to $544,105 for the three months ended March 31, 2023, a decrease of $406,516, or 75%. Our decreased cash provided by financing activities was primarily from $322,500 of decreased net proceeds received on debt financing and $200,000 of debt repayments in the current period, as partially offset by $98,298 of deferred offering cost payments in the prior period.

Current wording

Net cash provided by financing activities was $2,202,108 for the six months ended June 30, 2024, compared to $3,850,171 for the six months ended June 30, 2023, a decrease of $1,648,063, or 43%. Our decreased cash provided by financing activities was primarily from $4,826,000 of decreased proceeds received on the sale of common stock and $10,779 of increased principal payments on finance leases, as partially offset by $578,710 of increased net proceeds received on debt financing, $2,268,791 fewer debt repayments, and $341,215 of decreased deferred offering cost payments in the prior period.

Previous wording

Our financial results are affected by the selection and application of accounting policies and methods. In the three-month period ended March 31, 2024 there were no changes to the application of critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Our financial results are affected by the selection and application of accounting policies and methods. In the six-month period ended June 30, 2024 there were no changes to the application of critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.